Germany and Greece are on a collision course ahead of crucial bailout talks on Friday after Berlin knocked back a Greek compromise proposal and insisted the country stick to its existing austerity plan.

Setting the scene for a make-or-break meeting in Brussels, the eurozone’s largest economy dismissed as “not substantive” a proposal from Greek finance minister Yanis Varoufakis,which appeared to have all but capitulated to creditors’ demands.

The rebuff from Berlin came just hours after Greece filed a formal request to its eurozone partners to extend its loan agreement, in the hope of averting a cash crisis.

A Greek government spokesman insisted that the eurogroup had only two options: either to accept or reject the Greek request. “It will then be clear who wants to find a solution and who doesn’t.”

The European commission welcomed the Greek proposal – widely seen as a climbdown on some of Greece’s key demands – as a positive sign that could pave the way for compromise.

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